Budget 2020: Steel sector seeks relief in customs duty on key raw materials

The domestic steel industry is seeking reduction in basic customs duty on key raw materials such as coking coal, pet coke, limestone and dolomite in the upcoming Budget.

Finance Minister Nirmala Sitharaman is scheduled to present the Budget for financial year 2020-21 on February 1.

"Anthracite coal, coking coal, coke, limestone, dolomite are vital inputs for the steel industry. The availability of these items in good quality is declining in the country and the industry has to depend on imports on regular basis," industry body Ficci said in its Budget recommendations for Indian steel sector.

The basic customs import duty on anthracite coal is 2.5 per cent. Since ferro alloy industry plays a vital role in steel manufacturing, it is necessary to make available these reductants at international competitive price to make Indian steel mills more competitive, it said while recommending that customs duty on anthracite coal be reduced to zero from 2.5 per cent.

Met coke, another vital input for the industry, had always attracted lower and concessional rate of customs duty, it said.

However, the basic customs duty was enhanced from 2.5 per cent to 5 per cent with effect from March 1, 2015. Additionally, anti-dumping duty was also imposed on its imports with effect from November 25, 2016.

"As a result, the cost of this (met coke) vital input in steel manufacturing has gone up necessitating increase in price of steel which is acting as deterrence to the competitiveness of domestic products in international markets vis--vis similar products of other countries like China," it said.

"Moreover, high inputs costs have led to an inverted duty structure in the domestic industry and are acting as a deterrent to government's Make in India initiative, as domestic producers have less incentive to import met coke. Rather, imports of finished steel goods are preferred," it said and suggested that duty on metallurgical coke be reduced to zero.

The industry body said exemption available to coking coal was also removed by the government in 2014-15 Budget by bringing it at par with other types of coal and imposing 2.5 per cent basic customs duty.

This amendment has adversely affected steel manufacturers in India. Coking coal is one of the principal raw materials used in steel manufacturing and predominantly used for making coke for use in steel making and thus forms a major part of the final price of the steel, it said.

"Levy of 2.5 per cent of duty on coking coal and simultaneously fixing the import duty of 5 per cent on coke has adversely affected the costing of steel. It is requested to restore the exemption of nil rate of duty allowed earlier to coking coal without any technical definition of coking coal," it said.

Ficci also recommended zero customs duty on steel grade limestone and dolomite as increase in steel production has led to rising demand for SMS (steel melting shop) and BF (blast furnace) grade limestone.

Limestone imports have been increasing consistently as the reserves of SMS and BF grade limestone within the country are scattered and there is a capacity limitation of the existing limestone mines in various states.

"In 2014-15 Budget, exemption was granted to Limestone (CTH 2521) and Dolomite (CTH 2518) for metallurgical use conforming to IS: 10345-2004 (Limestone) and IS: 10346-2004 (Dolomite). While there is no apparent issue in this regard but now all samples which were hitherto not being tested are now being sent to Bengaluru laboratories for testing due to which finalization of provisional assessments are getting unduly delayed," it said.

"This substantially increases transaction costs and litigation defeating the purpose of benefit of concessional duty. So, it is requested to reduce the customs duty on all grades of limestone and dolomite from 2.5 per cent to nil in line with similar imports from ASEAN countries, without any technical condition," it added.

Exemption of import duty on ferrous and stainless steel scrap, imposing 30 per cent export duty on graphite electrodes, increase in basic customs duty for certain steel products, reduction of import duty on moly oxide are some of the other recommendations made by Ficci to the Finance Ministry.